Wash. Post Promotes Claim That Corporate Taxes Are Too High

Editorial Board: Republican-Controlled Congress Creates Opportunity To Reform Highest Tax Rate In The “Industrial World.” A November 9 Washington Post editorial argued that the upcoming Republican takeover of the Senate creates an opportunity for the two parties to come together on “bipartisan legislation” to reform the tax code. Noting areas of disagreement between the parties regarding whether tax proposals should increase or decrease overall revenue, the Post stressed that both President Obama and Republicans agree that the United States must work to reduce corporate tax rates:

President Obama, Senate Majority Leader-to-be Mitch McConnell (R-Ky.) and House Speaker John A. Boehner (R-Ohio) all put tax reform on their post-election lists of possible bipartisan legislation. To be sure, Democrats want tax reform to raise money; Republicans want cuts. Still, a good deal of work has already been done on basic principles of a tax overhaul by Democrats and Republicans in both houses of Congress. This means that, if Mr. Obama and his GOP counterparts on Capitol Hill wanted to achieve tax reform in the new Congress, they would not have to start from scratch -- and that the partisan gap is hardly unbridgeable.

Mr. Obama himself has long advocated reform of the country's uncompetitive corporate tax system, with its highest-in-the-industrial-world 35 percent top rate. His proposed top rate, 28 percent, is not far from the 25 percent House Ways and Means Chairman Dave Camp (R-Mich.) targeted in the comprehensive plan he laid out this year. [The Washington Post, 11/9/14]

Wonkblog: American Businesses “Labor Under The Highest Corporate Tax Rate In The Developed World.” An October 1 post on The Washington Post's Wonkblog claimed that American businesses “currently labor under the highest corporate tax rate in the developed world,” while outlining debates within the Republican Party regarding the best way to approach tax reform in 2015 and beyond. [The Washington Post, 10/1/14]

Corporate Tax Rates In The United States Are Not Unusually High

EPI: American Corporate Tax Rates Are In Line With Those Of Other Advanced Economies. According to June 2013 report from the Economic Policy Institute (EPI), the corporate income tax rate in the United States is not abnormally high when compared to those in other countries or when compared to tax rates in the United States over the past 60 years:

• Claims that the United States' corporate tax rate is uniquely burdensome to U.S. business when compared with the corporate tax rates of its industrial peers are incorrect. While the United States has one of the highest statutory corporate income-tax rates among advanced countries, the effective corporate income-tax rate (27.7 percent) is quite close to the average of rich countries (27.2 percent, weighted by GDP).
• The U.S. corporate income-tax rate is also not high by historic standards. The statutory corporate tax rate has gradually been reduced from over 50 percent in the 1950s to its current 35 percent. [Economic Policy Institute, 6/4/13]

GAO: Effective Tax Rates For Large, Profitable Corporations Fall Between 13 Percent And 23 Percent. According to a May 2013 report from the Government Accountability Office (GAO), the effective tax rates paid by American businesses during the 2010 tax year “are likely to vary considerably across corporations.” Profitable corporations paid cumulative domestic and international tax rates between 13 percent and 17 percent after accounting for subsidies and other benefits. The average worldwide effective rate paid by profitable and unprofitable companies was 22.7 percent, “well below the top statutory tax rate of 35 percent.” [Government Accountability Office, May 2013]

CRS: Effective Tax Rate In The U.S. “About The Same” As The Rest Of The Developed World. According to a January 6 report by the Congressional Research Service (CRS), relatively high statutory tax rates in the United States equate to effective tax rates that are “about the same” as other developed countries after accounting for subsidies, loopholes, benefits, and the relative size of the American economy. The report also found that “estimates for a rate cut from 35% to 25% suggest a modest positive effect on wages and output: an eventual one-time increase of less than two-tenths of 1% of output.” Meanwhile, “The revenue cost of such a rate cut is estimated at between $1.2 trillion and $1.5 trillion over the next 10 years.” [Congressional Research Service, 1/6/14]

Major American Companies Are Not Suffering Under The Current Tax Structure

EPI: Corporate Taxes Are Trending Lower While Corporate Profits Continue To Rise. In an October 8 blog post rebuffing claims that American businesses are overtaxed, economist Thomas Hungerford of the Economic Policy Institute showed that corporate profits in 2013 were at their highest point relative to overall economic activity since 1946. At the same time, tax revenue from corporate earnings was near its lowest point over the same period:

[Economic Policy Institute, Working Economics, 10/8/14]

GAO: Corporate Tax Revenue Falls As Individual Tax Revenue Increases. According to a May 2013 report from the GAO, as the total share of federal tax revenue paid by corporations has fallen, proportionally more revenue has been generated through individual income taxes and taxes for “social insurance and retirement” programs:

[Government Accountability Office, May 2013]